Is Trump's Election Too Little, Too Late for Electric Utilities?

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Electric utilities could gain significantly from Donald Trump's election as president, given his steadfast opposition to the Obama administration's energy and environmental policies. But electric utility trade groups and electric utilities themselves aren't exactly crowing about president-elect Trump the way coal companies are, and the response from investors is difficult to discern, because so many are poised to declare dividends, which tend to depress stock prices.

Coal companies enthusiastically supported Trump's candidacy and they took a high-profile approach in congratulating the New York developer on his success on Election Day. For more on that, see November 16, 2016, article - Trump on Energy: Does Coal Have a Brighter Future in the Coming Administration?

When contacted by Industrial Info Resources, several utilities and utility organizations had statements containing a flavor of "the horse has already left the barn." Compared to coal companies' response to Trump's election, electric utilities' more muted response could be because several significant energy and environmental regulations from the Obama administration, including the Mercury and Air Toxics Standard (MATS) and the Cross-State Air Pollution Rule (CSAPR), are final and have survived court challenges. That has caused dozens of utilities across the country to close uneconomic coal-fired generators, build renewable generation, build new gas-fired generation or install pollution-control equipment on their coal-fired generators that remain economic.

The Obama administration's signature energy initiative, the Clean Power Plan, is tied up in litigation. Oral arguments over the rule were heard in September by the U.S. Court of Appeals for the D.C. Circuit. Most analysts expect that whichever party lost in that court would file an appeal to the U.S. Supreme Court, compelling the other side to continue the litigation. It is not clear when the D.C. circuit court will rule on the case.

The Clean Power Plan, roundly criticized by Trump as a "job killer," is a particularly knotty challenge for electric utilities because there is no commercially proven technology that can reduce carbon dioxide (CO2) emissions from a coal-fired generator to the future allowable level. The rule limits emissions from newly constructed coal-fired generators to no more than 1,400 pounds of CO2 per megawatt-hour of electricity produced, significantly lower than even the most-efficient coal-fired power plant. The rule assumed these new coal-fired generators would be equipped with carbon capture and sequestration (CCS) technology, but that technology has not been deployed on a commercial scale as yet. New gas-fired generators will be allowed to emit no more than 1,000 pounds of CO2 per megawatt-hour of electricity generated, a level achievable with existing high-efficiency combined-cycle gas turbines.

In a statement, Tom Kuhn, president of the Edison Electric Institute (EEI) (Washington, D.C.), which represents shareholder-owned electric utilities, said: "EEI congratulates President-elect Trump and is looking forward to working with his new administration to navigate the many challenges and opportunities facing our industry."

"Right now, our industry is in the midst of a profound transformation, and EEI's member companies remain committed to delivering safe, reliable, affordable, and clean energy," Kuhn continued. "Given the importance of energy issues and the value that our industry provides to our nation, we want to ensure that we are communicating with the incoming administration, policymakers, and key stakeholders about the investments our members are making and the projects they are undertaking to benefit their customers and our energy future."

American Electric Power (NYSE:AEP) (Columbus, Ohio), one of the nation's largest electric utilities, said this in a statement: "AEP is in the midst of an important transition to support a cleaner energy economy. We are transforming the transmission grid to be responsive to new resources and technologies, while at the same time balancing our company's resource portfolio to provide new, cleaner energy and technology options for our customers. That will not change with a change in the administration."

"Donald Trump's support for infrastructure investment is positive, as it is critical to enable technological advances and a cleaner energy economy," AEP continued. "Given the importance of energy issues, we're hopeful that the Trump administration can work effectively with both parties to advance a coherent, consistent, and flexible energy policy for the nation. ... President-elect Trump has expressed support for a balanced fuel portfolio, and cleaner coal does need to be part of a balanced energy mix for the future. We hope that this administration will be able to provide economic opportunities in the communities that have been hurt by the environmental, technological and market issues that have reduced coal production."

Duke Energy Corporation (NYSE:DUK) (Charlotte, North Carolina) didn't explicitly comment on Trump's election, but it did say this: "We said before the election that whoever is elected president, we would be continuing to move our power plant fleet to lower carbon fuels and renewables (our carbon emissions have been reduced by 28% from 2005-2015). This has been driven by an array of federal emissions and state regulations, the economics of coal when compared to natural gas, and the age and relative efficiency of many of our coal plants when compared to natural gas plants."

Several electric trade groups contacted by Industrial Info Resources had no comment on the election of Trump as 45th president of the United States. One group, the National Rural Electric Cooperative Association (NRECA) (Arlington, Virginia), said this: "Keeping the lights on and bolstering the rural American economy are goals that transcend party lines. We look forward to helping the nation come together and move forward. It's important that the Trump Administration and the next Congress work in partnership with electric co-ops on common-sense goals like modernizing the nation's energy infrastructure and enhancing the quality of life in our communities."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.